South East key to NAB revival in Britain

NATIONAL Australia Bank, the country's largest, is pinning its hopes for recovery in its British operations on luring new customers in the South East while consolidating its Glasgow headquarters.

Revealing the results of a review of activities in the UK, the bank today said it hoped to recover in Britain within three years. It has sold its struggling Irish and Ulster banks for a profit of about £430m and retained the Clydesdale and Yorkshire banks but is looking to the South East as its profit driver as higher costs and falling margins take their toll.

NAB plans to open 12 new branches in the region and to convert 50 Clydesdale and Yorkshire branches into flagship High Street centres. But there will be more pain ahead before any turnaround, with the bank saying UK earnings would fall this year.

Some fund managers want NAB to exit Britain entirely, saying it has failed to gain traction in key areas of the country. But its chief executive, Scotsman John Stewart, who took the top job after heading the British operations, rejects that argument.

Formerly a key player at the Woolwich and Barclays, Stewart said the UK was an attractive market for NAB and added that it had a positive outlook.

Dismissing arguments that the Aussie bank had too small a presence in Britain to compete, he said the market was big enough for smaller banks to compete profitably in niche areas.

'It [the UK market] is three times the size of the Australian banking market and offers growth opportunities not available to our Australian competitors,' he said.

NAB has 460 branches, 50 business banking centres, 4200 staff and 2.7m customers in the UK. The business generated a profit after tax of £188m in the year to September, about 14.5% of NAB's total profit of A$3.18bn (£1.31bn).

Lynne Peacock, NAB's European chief executive, said: 'As part of our change strategy, we are aiming for a significant reduction in our cost base, improved productivity, higher volumes of new business and improved customer and staff satisfaction.

'We are already seeing some positive early results from implementation of the new strategy. Clydesdale and Yorkshire are recording a decrease in customer attrition and an increase in new customers. This gives us confidence that a two- to three-year turnaround is achievable.'

Peacock added that one key measure of cost savings - operating both the Clydesdale and the Yorkshire under a single banking licence - had saved £60m, although she said details of the new structure would not be provided until May.